24th May 2025, Kathmandu
The Government of Nepal has announced major reforms to restructure the Nepal Securities Board (SEBON) and the Nepal Stock Exchange (NEPSE).
SEBON NEPSE Overhaul Underway
This initiative aims to strengthen regulatory oversight, improve market governance, and attract more investors. The changes will take place within the next year, following recommendations from a high-level economic reform commission.
Board Restructuring to Increase Government Oversight
The government plans to change SEBON’s board composition significantly. Private sector representatives will no longer sit on the board. This means that members from the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and the Institute of Chartered Accountants of Nepal (ECAN) will lose their seats.
Additionally, the Ministry of Law will remove its representative. Instead, government officials will replace these members. The Revenue Secretary from the Ministry of Finance and the Deputy Governor of Nepal Rastra Bank will join the SEBON board. This move seeks to increase direct government oversight in securities regulation.
The government will also appoint expert members to the board. These experts will provide technical knowledge and strengthen the decision-making process. Currently, SEBON’s board includes officials from the Ministry of Finance, the Ministry of Law, the Nepal Rastra Bank, and private sector representatives. The new structure aims to streamline governance and align SEBON’s work with national economic goals.
Restructuring Nepal Stock Exchange and CDS & Clearing Ltd
Alongside SEBON’s board changes, the government will restructure the Nepal Stock Exchange (NEPSE). NEPSE will undergo governance reforms and capital increases. The goal is to modernize the exchange and encourage private sector participation.
Moreover, the Central Depository System and Clearing Limited (CDS & Clearing Ltd) will also be reorganized. This entity manages the safe custody and clearing of securities. Its restructuring will improve market safety and transaction efficiency.
The government plans to complete both NEPSE and CDS restructures within a year. These reforms will strengthen the overall capital market infrastructure and enhance investor confidence.
New IPO Rules for Hydropower Companies
The government will introduce stricter rules for hydropower companies seeking to raise capital through Initial Public Offerings (IPOs). These companies will only be allowed to issue IPOs after they begin production.
This regulation protects investors by ensuring companies have proven operational capacity before raising funds from the public. The government intends to implement this rule within the next year.
Simplifying Capital Market Participation
The reform package includes measures to make capital market participation easier for private sector companies. The government will reduce the costs and complexities of issuing shares and bonds.
They will introduce transparent methods such as premium pricing and book-building mechanisms for share issuance. These methods help establish fair market prices and improve transparency.
Furthermore, margin loans will become available through securities brokers within the next year. This facility allows investors to borrow funds against their securities, potentially increasing liquidity in the market.
Facilitating Government Bond Trading
The government also plans to facilitate the secondary trading of government bonds. This step will open up new investment opportunities and improve market depth.
Instead of directly investing government funds into institutions, the government will issue bonds as financial instruments. This approach will promote more efficient investment channels.
Promoting Investor Awareness and Market Development
Raising public awareness about capital markets is a key focus of the reform plan. The government aims to educate the public within a year about the benefits and opportunities of investing through financial markets.
By encouraging the use of financial instruments, the government hopes to boost investment culture across Nepal. Increased investor participation will help deepen and diversify the capital markets.
Background: Recommendations from the Economic Reform Commission
These reforms follow the recommendations of the High-Level Economic Reform Commission formed under the Prime Minister’s Office. Chaired by Rameshwar Khanal, the commission was tasked with improving economic competitiveness and governance.
The commission’s report highlighted the need for stronger regulation and improved market infrastructure. The government has now moved to implement these suggestions as part of its broader economic reform agenda.
Expected Impact on Nepal’s Capital Market
The restructuring of SEBON, NEPSE, and CDS & Clearing Ltd will modernize Nepal’s capital markets. Removing private sector members from SEBON aims to reduce conflicts of interest and improve regulatory independence.
Increased government representation and expert appointments are expected to lead to better oversight and governance. The new rules for IPOs and margin lending will protect investors and increase market activity.
Moreover, by simplifying share issuance and improving transparency, the government hopes to attract more companies and investors. Facilitating bond trading and financial instrument use will diversify investment options.
Lastly, public awareness campaigns will educate potential investors and encourage broader participation. Together, these reforms aim to build a stronger, more efficient, and investor-friendly capital market in Nepal.
For more: SEBON NEPSE Overhaul Underway